What’s the best CD term to buy now?

With the Federal Reserve a year into its rate hiking path, with more increases still expected, CD shoppers can find themselves in a bit of a quandary. What’s the best CD term to buy right now?

When rates are low or at least stable, you generally do best buying the longest term for which you’re comfortable locking up the funds. That’s because in times of low or stable rates, five-year CDs tend to pay the most.

But when rates are in a known rising or declining pattern, what banks and credit unions are willing to pay on different durations shifts. While a rising Fed rate, like we’ve been facing since last March, raises CD rates in general, the best-paying term does not always remain the longest term.

Take the current rate landscape. The FDIC national averages for February show that rates paid on 1-year and 2-year CDs are higher than 3-, 4-, and 5-year certificates, with 1-year CDs having the highest national average of any term.

This is also true among the top rates from the best nationwide certificates. According to Investopedia’s daily CD rankings, the top rates on 1 year, 18 months, and 2 years, are all above 5%, while the 3-year and 5-year top rates are in the upper 4% range.

For those wanting to hold funds in CDs for the long term, 5-year certificates are still a good option since you’ll be guaranteed a rate that’s competitive today for five years to come. But if you’re looking for a shortto mid-term play to capitalize on today’s high rates, a 2-year CD might be best, as it offers among today’s highest rates while presumably outliving the Fed’s increases. Though rates may drop in 2024, you’d still be locked into one of today’s best rates until 2025.